As the threat of tariffs looms, the U.S. agriculture market is expected to be one of the main industries to be hit by economic fallout. The market is split on the timing and size of tariffs on China, the EU, Mexico, Canada, and now Russia—but traders, analysts and farmers are preparing in the same way they did in 2018. Grains are major U.S. exports to all of the threatened nations, with the exception of Russia. Pork is also a major U.S. export to China and Mexico in particular. These futures trading in Chicago are expected to fall if these nations are no longer able to purchase U.S. goods.Traders need to include President Trump’s threat of levying a 10% tariff on imports from China and the EU by Feb. 1—in addition to the 25% already promised on Mexican and Canadian imports—as they determine the value of grain and livestock futures.
During Trump’s first term, a tit-for-tat trade war with China led to tariffs being implemented against shipments going to and from the U.S. With China being the leading buyer of U.S. soybeans—purchasing 24.4 million metric tons of them in the last marketing year—the absence of their demand caused lower prices, which led to the Department of Agriculture providing millions of dollars’ worth of aid to help offset China’s absence.
Source: WSJ